Higher EPS pension: EPFO releases circular on pension computation method
The Employees Provident Fund Organisation (EPFO) has released a circular on how the higher pension will be calculated for those employees opting for a higher pension based on actual salary under the Employees Pension Scheme (EPS). As per the circular, the formula for the calculation of higher pension will be different for those retiring before September 1, 2014, and those retiring after this date.Those who retired before September 1, 2014
If the pension (EPS) of an eligible applicant started prior to September 1, 2014, then the higher pension calculation will be based on the average monthly pay drawn during the contributory period of service during the 12 months preceding the date of retirement i.e date of exit from the membership of the pension fund.Those who retired/will retire on or after September 1, 2014
For those retiring on or after September 1, 2014, the higher EPS pension calculation will be done considering the average salary during contributory period of service in the span of 60 months preceding the date of retirement.Why September 1, 2014 is important
It is important to note that the government revised the pension calculation formula in September 2014. Till August 31, 2014, the average salary during the 12 months preceding the date of retirement, was taken into account. However, from September 1, 2014, the government revised it to 60 months. This change resulted in a lower pension for those retiring on or after this date.Currently, the formula for calculating pension under the EPS scheme is equal to:
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=(Average salary of 60 months X service period) divided by 70.
The ‘average salary’ above is the basic salary of an employee. However, the salary used for calculation of higher pension for those opting for higher EPS pension will be the full actual salary (inclusive of allowances etc instead of just the basic salary).
Here is an example to understand this. For instance, assuming you joined the EPS scheme in October 2008 and your retirement is in September 2033. Here, the service period is of 25 years (September 2033 - October 2008). The average salary for pension calculation will be calculated on the basis of your average pay in the last 5 years (60 months) of working.
Had you retired on or before August 31, 2014, then the average salary for a higher EPS pension would have been calculated on the average pay in the last year of working.
The last date to apply for higher EPS pension is June 26, 2023.
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This story originally appeared on: India Times - Author:Faqs of Insurances
